The Crash of 1929

Interview: Michael Nesbitt

The Radio Corporation of America (R.C.A.) was the hot tech stock of the Twenties. The young company capitalized on the enormous popularity of radio — as both a manufacturer of radio sets and a leading broadcaster of programming. R.C.A. was one of many stocks that were manipulated by a pool — a group of investors who drove up the price through coordinated purchases. R.C.A. stock plummeted in value when the stock market crashed in October 1929, slumping to $10 a share by 1931. Michael Meehan was the pool operator who steered R.C.A. stock sky-high during the Roaring Twenties.

Michael Nesbitt, grandson of Michael Meehan

R.C.A. was the great glamour stock of the Twenties. It was like what the computer stocks were in a later age… It was very exciting, it was very open-ended. Enormous amounts of money were made in R.C.A. And it was the quintessential pool stock…

A brokerage pool was something that was common in the Twenties, where a number of individuals in Wall Street would pool their money and take a position in the stock. By taking a position, they would quietly accumulate it until they owned two, three, four hundred thousand shares of stock. Then they would begin to, what was called, 'painting the tape.’ The tape that was used then was a narrow piece of paper that went along and printed out all the transactions in the stock. And they would make the stock look exciting. They would trade among themselves and you’d see these big prints in R.C.A. And people will say, it looks as though that stock is being accumulated. They would also plant stories through public relations people about what an exciting stock and company R.C.A. was. All of this, of course, was legal in the Twenties and none of this behavior is legal today.

This stock… typified that market more than anything else. The great prosperity that went along with it… the fact that it was in those days, very cutting-edge technology. It was the newest and most modern thing and it was very exciting…

Would the stock have had the enormous move that it had without the pool? Probably not… The stock was clearly overpriced. But that often happens in a big move in any glamorous stock. It’s very hard to say how open-ended it is, what’s a fair price, where could this stock go, et cetera. So without the pool R.C.A. would still have had quite a significant move, but with the pool it had a much bigger move.